Access Velocity Day 1: A Game of Inches and Investments

I heard the same thing time and time again from dealers at Access: Velocity.

After all the effort, energy, money and time invested in retailing new and used vehicles, there just isn’t as much profit left on the monthly income statement as there used to be.

The proceeds from all the activity and sales amount to “profit dust” these days compared to the returns dealers once derived from their dealerships.

This reality emerged in our Access: Velocity workshops that addressed how dealers could sharpen their operational processes to reduce inefficiencies and drive more sales, and profitability, from their new/used vehicle departments and wholesale acquisition efforts.

But here’s the thing: When you take a collective look at the best practices and ideas shared in the workshops, they amount to a lot of small, incremental steps on the road to performance and profit improvement.

That’s because today’s car business is really a game of inches, where it’s imperative that dealers pay greater attention to the data and details of their businesses to be successful. The business calls for a higher level of operational discipline that, quite frankly, puts the very nature of many dealers, particularly those who came up through sales departments, to the test.

The good news is that most dealers here realize, or at least recognize, the need for seeking out every advantage they can. They understand that technology and tools will play a role. They know, or at least sense, that what guest speaker Jason Stein, publisher of Automotive News described as the “digitization” of dealerships is quickly gaining steam.

This backdrop probably accounted for a lot of the enthusiasm from dealers around vAuto’s latest innovation, which we discussed in the opening general session.

Beta test dealers shared how the innovation helps them instantly identify a vehicle’s investment value and use the insight to drive appraising and pricing decisions.

One dealer reported a $300 lift in front-end gross profit as managers worked to maximize gross on vehicles that deserve it, and minimize time in inventory for their more troubled investments. This is good news at a time of unprecedented margin compression.

We closed the day at a Chicago icon, Lou Malnati’s, where some of the conversations were deeper than the pizza.

It was a fitting end to a nearly perfect, and highly productive day at Access: Velocity.

I am on Chapter 13 of your book “Like I See it” and something just dawned on me. As you talked about how Sales manager’s need to learn how to become better accessing the investment quality of a used car, the thing I hear the most from my desk managers is ” But MMR is X amount of dollars”. The all quickly go to MMR to justify their appraisal without looking at any of the other factors, days supply, cost to market and condition. I’m thinking about removing MMR from the pricing guides all together. Your thoughts?

Yes, you are thinking correctly. Every good car person knows that the best way to know how to get in a car is to first know how to get out. Being able to see the likely retail transaction price of a vehicle is something that was not previously available before the market became transparent, and technology like ours came along. Now that we can determine what any vehicle is likely to retail for, we should start there and deduct our expenses, reconditioning and desired minimum profit to derive the vehicle’s proper appraised value. The only reason that MMR is of relevance today as a means of knowing what a used vehicle is worth is if the vehicle being appraised is going to be liquidated in the wholesale market. Before the market became transparent and technologies like ours came along, the only visible market for a value was what it transacted for in the lanes as reported by MMR and other third-party guide books that monitor those lanes and reported therefrom.

So, if it was my dealership, I would appraise every retail vehicle from the retail market back, rather than the wholesale market up. Again, every good car person knows that the best way to know how to get in a vehicle is to first know how to get out. For those who do not yet understand this basic principle of today’s used car market, they are operating in the past.

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Dale Pollak believes the car business is at a critical crossroads. Like I See It offers a unique perspective and practical solutions to help dealers, OEMs and solutions providers ensure a viable and profitable future.